Advanced Micro Devices, Inc. (AMD) announced its earnings report late yesterday, as did the world's largest operating system maker, Microsoft Corp. (MSFT).

I. Microsoft Gets Boost From Deferred Revenue

Both companies beat analyst estimates.

Despite slowing PC sales and criticisms about its design direction with Windows 8, Microsoft drew revenue of $20.5B USD in its fiscal third quarter -- up from $17.4B USD in 2012's fiscal Q3. Windows revenue was essentially flat, but was up 23 percent with the inclusion of deferred Windows 8 upgrade income.

Microsoft made $6.06B USD in profit. While the revenue was roughly in line with a Financial Timessurvey of 23 analysts, the profit was a bit of a surprise: the surveyed analysts only expected $5.7B USD in profit.

Microsoft posted a bigger-than-expected profit on the back of Windows 8 upgrade revenue.
[Image Source: AFP]

AMD saw revenue sag to $1.09B USD, down from $1.59B USD a year before. But it further trimmed its operating loss to $146M USD, down from a whopping $473M USD in 2012. That loss was significantly smaller than the $202M USD analysts expected it to post.

Rory Read, AMD president and new CEO comments, "Our first quarter results reflect our disciplined operational execution in a difficult market environment. We have largely completed our restructuring and are now focused on delivering a powerful set of new products that will accelerate our business in 2013. We will continue to diversify our portfolio and attack high-growth markets like dense server, ultra low-power client, embedded and semi-custom solutions to create the foundation for sustainable financial returns."

quote: Despite slowing PC sales and criticisms about its design direction with Windows 8, Microsoft drew revenue of $20.5B USD in its fiscal third quarter -- up from $17.4B USD in 2012's fiscal Q3. Windows revenue was essentially flat, but was up 23 percent with the inclusion of deferred Windows 8 upgrade income.

Microsoft made $6.06B USD in profit. While the revenue was roughly in line with a Financial Times survey of 23 analysts, the profit was a bit of a surprise: the surveyed analysts only expected $5.7B USD in profit.

This really should not be a surprise to anyone. Microsoft had been using both "deferred profits" (and another accounting trick known as "contingent liability accounts") to float profits from a good quarter to a lesser quarter since the 1980s. Both techniques are 100% acceptable under GAAP rules and are 100% legal under U.S. laws and regulations. With proper documentation and justification you can "sandbag" profits for several years. This allows Microsoft to pull out significantly higher profits on a down quarter. As far as I know, no other major corporation uses both these techniques as much as Microsoft has for the last 25+ years.

Haven't you ever wondered why Microsoft has been able to meet or beat the Street's expectations for the vast majority of the last 30 years? Now you know -- and it's 100% legal and acceptable to the financial community.

That's a nice trolling man, but here's another, quite more juicy bit. Tony should be interested.

Hey Tony, check out this one: entertainment and devices division (you know, the people that make and sell surface) posted 1 billion of gain in revenue and half a billion of gain in income, compared to previous quarter. Now dig this: if you divide 1 billion of extra revenue this quarter by a surface asp which is like 600 bucks you'll get EXACTLY the number of surfaces sold as estimated by analysts - 1.5 million.

Well, given that most of these sales are real horrible RT, this is not so bad. If they sold 1 million of normal Windows licenses I'd agree this is a failure, but 1 million of RT sales? This is WAY more than I expected, or anyone else expected (except you of course, you never used RT so you have no idea what I'm talking about)

An accurate statement is that it is significantly less than competition, but saying it is a "pathetic failure" is a gross misuse of those words. 1.5 million devices shipped is a lot regardless of what the product was.

If you just compare it with iPad sales then of course it's a failure, but if you compare RT with normal Windows then you realize that it's more like moderate success, since if I were representing all the Windows tablet buyers, not a SINGLE RT copy would have been sold. For me and for other smart buyers like me it was obvious from the start that RT was a stillborn abomination that no one needs or will ever need. Given this fact, the sale of the whole MILLION of RT surfaces is freakin astonishing! People bought the whole MILLION of useless stupid crap. Holy shit. That's all I can say about it.

P.S. I own RT surface too btw :) I use it lightly, mostly for web and video, internet TV, mail, some quick game once in a while like Judge Dredd, stuff like that. Still doesn't make RT less shit. The fact that I bough a shit tablet doesn't make it less shit.

Why do you think Windows RT is shit? Is it just because it can't run x86 windows apps? If that's the case it's a pretty poor argument to say that the OS itself is bad, just that Microsoft did a poor job differentiating it from their other versions. I've thoroughly enjoyed my surface RT, I just have to realize what I can do with it and not expect it to do something it can't.

yes, it's shit because it can't run x86 apps. all the other OEMs made pretty nice Atom tablets that can do everything that RT can do but they are also cheaper, run all windows x86 software, last longer on a battery and work faster too, however stupid emballmer made a useless tablet based on ARM that can do nothing, it is way worse than competing Atom tablets, and to add insult to injury it also costs more. I'd understand if emballmer was offering RT for like $200, it would be like hey people here we have shit tablet that is useless and can't do shit BUT it only costs $200! no, emballmer was way too stupid to do that. this is why I was surprised there were the whole ONE MILLION idiots who bought useless RT when they were selling better and cheaper Atom tablets right next to RT!

people are totally fucking braindead and emballmer also washed their dead brains with his stupid click click dancing ads, so idiots who bought RT would feel better or something, apparently RDF works the other way too :) anyway I too kinda enjoy my RT sometimes, it's not very bad, it's just I will always regret that I bought RT instead of an Atom based tablet, but now it's too late. I got myself core i5 tablet with win8 already and when bay trail win8 tablets are out RT will finally die, I'll probably get bay trail tablet too in addition to my current core i5 one (it's a surface pro btw :P)

I'm convinced that RT is just a backup plan to make sure Intel didn't sandbag its next Atom effort.

Intel couldn't have been happy with how netbooks displaced a lot of entry level laptop sales with CPUs that give Intel far more profit per unit, and this is despite them gimping Atom and its chipset quite a bit in the early days. They made Atom just barely good enough so that along with the Intel brand, they stopped AMD or Via from claiming that market.

Clovertrail has had some supply problems, and tablets based on it should be as cheap a ARM tablets, but they aren't. MS decided to send a message.

I own a Pro and RT Surface. When I'm not needing to use beefy x86 apps I prefer using the RT. I feel that RT does have a future in the mainstream market. The inclusion of Office is a nice perk, and it could be a real winner with a next generation CPU and Wacom digitizer like the pro. I think it's very impressive how well my RT runs even with a gimp (by today's standards) Tegra 3.

It would depend upon the exact meaning of "1.5 million devices shipped".If that is 1.5 million sold to end users, that's a lot.If that is 1.5 million retained by end users after accounting for any and all returns during that period then that truly a lot.If that is 1.5 million shipped to Microsoft's distributors (with an unknown number, but lesser number, sold to end users) then it's disappointing as some companies are known to channel stuff (NOT saying that's what Microsoft did).Without an accurate definition of "1.5 million devices shipped" it is impossible to say whether this was a significant number or not.

I was just stating that people should not be surprised if Microsoft beat expectations on profit even thought overall income was not that great.

I just was stating a well known technique that Microsoft has been using for many years to bolster its reported profits. There's nothing wrong with Microsoft doing it. Many large companies do it to some extent. Microsoft just does it more than most. There was a controversy in the late 90s over Microsoft using this technique to continuously beat the Street's projections, but the furor over their use of this technique died down after a couple of months. Then everyone went back to not caring about it at all. (The supposed objection of a few was that Microsoft deferred profits and used contingent liability accounts to hold back profits and rolled out "just enough" profit each quarter in order to beat the Streets expectations, thus allowing Microsoft to "exceed expectations" quarter after quarter even during a down quarter. It turned out that most analysts and institutional investors in the long run did not care. Thus the whole controversy blew over.)

How is any of this trolling? I did not bash Microsoft (or any other company) for using GAAP approved methods for showing a good profit this past quarter. I did not say Microsoft did anything underhanded. I explicitly stated that what Microsoft does is 100% within the rules.

quote: Tony would be interested in my post, not yours. And if it's not trolling then excuse me please, but it definitely sounded a bit like trolling to me.

Sadly you have become afflicted by the all too tiresomely widespread practice of using the word 'troll' or 'trolling' as short hand for 'you have posted something I disagree with or dislike but I cannot be bothered to, or are incapable of, properly responding so I will just use an insulting shorthand word to dismiss your comment'.

quote: Of course you do. It is a balm to your soul to make up for each time you swing your legs over the bed when you get up in the afternoon hearing your knees and hip joints creak and grind in protest.

quote: Haven't you ever wondered why Microsoft has been able to meet or beat the Street's expectations for the vast majority of the last 30 years? Now you know -- and it's 100% legal and acceptable to the financial community.

If you 'float' a profit from one quarter to another that would mean you did not meet expectations in the month you floated profits from. This technique does not create profits, it just moves it from one quarter to another. It is highly doubtful this is the reason MS exceeds earning expectations. If profits are deferred in one quarter, and used in a future one, that would mean MS would not meet earning expectations in the quarter profits are deferred from.